Tennessee lawmakers adjourn after finalizing $1.9B tax cut and refund for businesses

NASHVILLE, Tenn. (AP) — Tennessee's GOP-controlled General Assembly on Thursday adjourned for the year, concluding months of tense political infighting that doomed Republican Gov. Bill Lee's universal school voucher push. But a bill allowing some teachers to carry firearms in public schools and one adding a nearly $2 billion tax cut and refund for businesses received last-minute approval.

For months, Lee declared enacting universal school vouchers his top priority for the legislative session. At the same time, he warned that lawmakers must pass the major tax cut and refund for businesses to prevent a potential lawsuit as critics alleged the state violated the U.S. Constitution.

The ambitious pitches were made to a legislative body still harboring deep resentments from the past year, where inaction on gun control and safety measures had left deep divides between the Senate and House. Meanwhile, the explosive attention from the expulsions of two young Black Democratic lawmakers resulted in retaliatory restrictions on how long certain House members could speak during legislative debates and limitations on seating inside the public galleries.

“This was a session of good, bad and ugly,” said Democratic Sen. Raumesh Akbari. "Unfortunately some really really bad bills ended up passing."

While Lee was unable to find consensus on his voucher pitch — an initiative that he vowed to renew next year — he was able to secure a last-minute deal on the eye-popping $1.9 billion tax cut and refund for businesses. The amount is almost 4% of the state's $52.8 billion budget, which largely does not contain tax breaks for most Tennesseans.

“We accomplished things that will benefit the people of this state,” Lee told reporters after lawmakers adjourned. “And I’m proud of the work of the men and women that have come together and worked together to compromise and figure out the way forward to make life better for the people that live in this state.”

At issue are concerns that the state’s 90-year-old franchise tax violates the U.S. Constitution’s Commerce Clause, which bans states from passing laws that burden interstate commerce. The statute hasn't been formally challenged, but late last year, a handful of companies sent a letter to lawmakers demanding the Legislature fix the law or risk a legal battle.

“Bottom line, Tennessee pays its bills,” said Republican Sen. Rusty Crowe. “The state of Tennessee wrongly took this money and we're going to pay these companies back.”

House and Senate leaders disagreed for months over details on how to resolve the legal questions surrounding the franchise tax. On the last day of the session, both sides conceded to offer businesses to apply for retroactive refunds for the past three years in exchange for temporarily disclosing the names of businesses that sought a refund and the ranges of refund amounts — a first in Tennessee history.

Yet the names of the businesses will only be posted by the Department of Revenue publicly for 30 days in June 2025. Companies will have to apply for the refund this year.

“These transparency stipulations are a joke,” said Democratic Sen. Jeff Yarbro, arguing that more could be done to disclose exact amounts even as Republicans countered that the agreed disclosure was unprecedented.

Funding for three years of refunds is expected to cost taxpayers $1.5 billion. It will cost another $400 million annually for the ongoing franchise tax break.

The final week of Tennessee's nearly four-month long legislative session also saw emotionally-charged debates over the arming of public school teachers and staff, with hundreds of protesters flocking to the Capitol to chant, “Blood on your hands” at the Republicans who passed the bill.

The legislation specifically bars parents and other teachers from knowing who is armed on school grounds.

On Thursday. Lee promised he would sign the bill into law. Once he does, it'll be the biggest expansion of gun access in the state after last year’s deadly shooting at a private elementary school in Nashville.

“There are folks across the state who disagree on the way forward, but we all agree that we should keep our kids safe,” Lee said, stressing that whether to arm public school staffers will be decided at the local level and not a statewide mandate.

With a Republican supermajority, Democratic members were unable to put up much of a fight against a long list of bills targeting the LGBTQ+ community, ranging from requiring public school employees to out transgender students to their parents and allowing LGBTQ+ foster children to be placed with families that hold anti-LGBTQ+ beliefs.

According to the Human Rights Campaign, Tennessee has enacted more anti-LGBTQ+ laws than any other state since 2015, identifying more than 20 bills that advanced out of the Legislature over the past few months.

Republicans and Gov. Lee also signed off on repealing police traffic stop reforms made in Memphis after the fatal beating of Tyre Nichols by officers in January 2023, despite pleas from Nichols’ parents to give them a chance to find compromise.

Around the same time, lawmakers removed the trustees of Tennessee’s only publicly funded historically Black university after Republicans argued it was needed due to mismanagement identified in audits. Democrats and others have countered that the increased scrutiny largely resulted from the attention over addressing Tennessee State University being chronically underfunded by an estimated $2.1 billion over the last three decades.

As fallout increased around the removals, House lawmakers spiked legislation that would have banned local governments from paying to either study or dispense money for reparations for slavery. A rare rejection of what had been a GOP-backed bill.

On abortion, lawmakers approved criminalizing adults who help minors get abortions without parental consent. That bill is currently awaiting Lee's expected signature after he had already signed legislation requiring public school students watch a video on fetal development produced by an anti-abortion group.

Kimberlee Kruesi, The Associated Press